Tencent Holdings Limited (TCEHY) 23 Mar 222021 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to Tencent Holdings Limited 2021 Fourth Quarter and Annual Results Announcement Conference Call. At this time, all participants are in listen-only mode. And after the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that today’s conference is being recorded. I to now, over the And Ms. to Instructions] would turn like conference [Operator Tencent IR from Huang Wendy team. you. Thank go Please, ahead.

Thank you, quarter and operator. XXXX annual our Good results evening, everyone. conference call. Welcome to fourth

to This general the the various but we presentation forward-looking start future of financial which by uncertainties for risks underlined market reasons. measures number variety are that from a performance Tencent. accordance IFRS. financial be unaudited be and we outside coming prepared Before may substitute statements, group's contains sources would like non-IFRS with not also of measures conditions it considered a some remind is in presentation, includes not for, should that of the and in about addition a of to, Information you realized as in

a of For section refer non-IFRS to the measures, our disclosure and website. please factors IR documents on of discussion our risk detailed

Now, let the on management team me call introduce tonight. the

kick short now a will business the Pony financial Chief review; James we call with provide CEO, will and will floor before Martin Officer, Pony. questions. the John Mitchell, for Financial Chief to open Strategy with discussion, strategy overview; off Ma, review; will Chairman discuss Lau, conclude President, Officer, Our will I Lo, a over and turn

year. Good Thank XXXX was you, everyone. evening, Thank Wendy. a you us. for challenging joining

change financial had strategic we implement measures the headwinds, certain embraced make continued year, and of revenue have to effect headway. the but During slowing growth. long-term we the sustainability, that reinforces our company's Despite

Quantum fiscal year-on-year. diversity private within significantly merchants views while domain, delivering programs to own more live Our to in powering facilitate Weixin and Many increased value increasingly, video GMV their ecosystem partners. independent users growth and their video accounts. grew

figures its healthy becoming travel most served verifying the new launch, since billion users visits health billion path and the XXX during pandemic. for Our viewed with total growth X.X

Box and together Recon, and collaborations facilitates SaaS between the workflows, amongst So the and more both Tencent deepened Meeting Tencent Cloud, Tencent fast-growing within efficient products. integration we organization.

by the industry-leading test by in services. Our in highest provide video number Golden market cloud And Battle solutions games of also China. Legends: we new and League ranked one the two domestic mobile we Spatula, revenue. BAU In launched games, Wild Rift of ranked other

developed to We and XX cooperation games and XX%. as of also the game X DAU to operate the with outside revenue we was mobile business and international out top FinTech by contribution increased operate China stable expertise. ceding,

innovation refocus Looking Internet to structurally value, user the technology forward, profitability. healthier on China is industry and shifting by characterized a believe socialize a we mode

environment are for adapting areas increasing sales repositioning on to We our Summarizing our sustainable financial numbers. strategic focus growth. new proactively the efficiency, sharpening long-term and by optimizing key costs, our

down RMB XX% and equity XX and down XX% operating growth X% revenue XX revenue profit Non-IFRS lower, was billion, RMB or to resulting XX% billion, RMB X% billion, our Total XX% quarter-on-quarter. while and quarter-on-quarter. up down year-on-year was for net holders attributable year-on-year fourth XXX Our X% decline. billion, Non-IFRS profit was year-on-year a year-on-year XX the quarter, costs revenue year-on-year quarter-on-quarter. RMB quarter-on-quarter. in increased X% was Gross profit

was Combined Mobile So, devices video, retail key long-form payment of news, games, XXX music, our we including activities, and first mobile social, and X.XX billion. our place was million. position generally in services, utilities. literature, of became MAU MAU QQ Weixin

for I strategic the to review Martin over Now hand will

good and and morning Pony, good evening you, Thank everybody. to

ourselves we new well. China fundamentally to we in and with discussed our for for a would confident why XXXX changed Pony you Tencent industry how industry Internet the share like and future. industry and as remain I year repositioning are Today, has we see and was the earlier, how As challenging the environment in structurally

aspects many the development, rapid has the revolutionized lives and people's digitization of of of period long significantly a industries. industry China daily Following to contributed Internet in

corporate have the However, expansion, participants years, aggressive overemphasized sustainable marketing and growth short-term several reckless industry most competition, overlooking growth. important benefits, zero-sum for elements of

As early the faced and has growth industry Since and XXXX, the become fundamental changes a unhealthy. Internet frothy industry's result, challenges. has

been healthy for we us in changes that industry user well-positioned to return is have innovations it for the believe correct Internet already introduced important most the to At and to security. oriented this on more protection cost challenging. regulations its innovation, new time, paradigm user fair to culture participants and New society. corporations, industry promote that and sustainable multiple for macroenvironment Amid are and has and way. sustainability in by key Tencent, these we long-term roots become a industry corporate on long-term industry user creating new focus where value, and elements In among behavior for paradigm, including balanced data fundamental challenges, should healthy development the growth. same the believe value the responsibility, At the competition, global and industry strongly a time responsible of sectors the we efficiency, compliance, technology and benefits elements social and value, focuses sustainable technology the

we changes new ourselves with align are better embracing industry proactively paradigm. the In to addition,

We costs are control to staff marketing progressively businesses. implementing and to initiatives our rationalize non-core and

half become onwards. these second and from initiatives from We XXXX expect to of apparent results the

will in at growth We're areas, repositioning pace that We accounts international and namely healthier to confident sustainable us SaaS, a a games. invest new industry in strategic to and paradigm. resume continue enable initiatives these our video growth

environment. to pressure of the experienced performance the year under XXXX, revenue the structural lower industry financial course Over we growth during We was challenges. new our amid as adjusted

own advertising, economic advertisers regulatory adapted conditions. new For is our and and ad to our service

healthy game been industry measures of very in impact minor which domestic gameplay environment direct our The lower has mines, leading revenue protection implement China. to we always small. measures business, from ensure these was games For a spending

measures indirect more was away minor arising and revenue of towards However, development shifting implementation. resources games from from impact development certain importantly, there new content protection

contribution industry SaaS, international games; costs XXXX; in reflecting to intense our factors; increased third, was during in and growth increased our deleverage, at lower performance operating XXXX the due level, affected which in heavy video reduced acquisition. financial At businesses areas, investments and three from the higher our such in marketing response incurred higher first, margin. margins course and several activities gross also investees, have new services, of accounts key business talent community and expenditure buy investments second, to losses aggressive Our mainly currently which by competition the user revenue on group as non-operating strategic

in Although, we services underlying financial believe good we faced and pressure in are our health. XXXX, businesses

benefit in growth more to protection fully and we launches environment of adapt XXXX. new the we upgrade solutions, to new our domestic games, from to late Banhao. the The impact in they measures as when receive advertising, game of XXXX. further releases ad digest expect the half new are we For expect second We minor

growth to For term. benefit IaaS which customer structure quality and reduce value all the optimizing the customers revenue to The we and its our should costs position. are maintaining long-term losses PaaS, on creation of and are focus at repositioning longer video, cost our we growth, leading over margins while

the areas. our hand, emerging in growth opportunities On see compelling we strategic growth other also

expanding collaboration SaaS. the For and scale our communication enterprise we of software, are

advertisers, we For user and video connection creators, accounts, merchants. with are enriching

I and at For international progress our latest In by areas. will expansions more franchise in studios. growth studios these games, market-leading pipeline operational few our we enhancement discuss our the category-leading strategic consistent three of compelling slides, on backed have next

process. communications China collaboration, digitization SaaS. rapid and enhancements focused our their In large with productivity in experiencing start are on increasingly particular, engagement, is growth SaaS Let's collaboration enterprises and and adoption SMEs. among enterprises in customer

vehicles During as Tencent key such care, and XXXX, WeCom, Meeting, and education, growth into Tencent health retail, achieved Docs manufacturing. inventory strong and user deepened penetration

user strategic among platform enhanced of employees With the recon the and product and productivity Meeting Tencent and experience efficiency. from increased complexity, strengthening reduced Enterprises upgrades, by, our positioning competitive would partners, recent the firstly, the as Tencent collaboration and we're benefit core Docs. for edges integration enhanced

in with differentiated enabling connection Weixin. deepen functions with Secondly, WeCom CRM

unlocking For communications size believe business models significant can and points internationally. expanding critical currently via for and SaaS instance, creation. market there collaboration services through are said using firstly, launched tools over of are within we touch Weixin network scale because, customer enhanced newly expansion enterprises services. revenue build customer generation for prioritizing is the the Weixin monetization We're as ahead future we confident WeCom and engagement significant enterprise value proven the effect Having in important that, potential multiple

to size fast of critical C enterprise experience monetizing significant share and deep is and indicator past for we growth in SaaS. the our China, leading potential premium in collaboration monetization which certain with communication products, spending can thirdly, leverage a SaaS. Secondly, of the similarities And

achieved the by supported has fourth year-on-year both Accounts, new Video overall which creators Olympics in Tencent, the user Video China DAU event. social quarter. platforms accounts Tencent in Sports, The Beijing other content. as more content with enhancements. from Tencent and to WeChat enhanced likes ecosystem. of reach well from of Winter also a highest by diversity time The of breakthrough per We Taking over Video Internet our ecosystem. doubled deepened including knowledge-based videos Turning operation editorial sports achieved among for content Accounts as sports core the expansion and within proliferation infrastructure and such and on in a growth our the content properties product total targeted sharing increased XXX,XXX coverage The videos categories was professional demonstrating News. successful viewed of Moments, user significant number in spent strength video than Accounts engagement. capabilities global content news, robustly, the as example, Tencent's and become music, leveraging our as We the an

engagement on upgrading strong more video through An and by original creators focused of with very our increasing private of building differentiation created deep official enriching SKU. are number brands user creator news, and users connections and media, nurturing content developing and domain been have leveraging and We our pools high-quality this retailers merchants accounts. account support with recognize

features We operations with merchants facilitating marketing also enhanced tools. shopping and are

early As stage we're video accounts, of for of still the in development. monetization

For XXXX, well. the as feed of Accounts. becoming optimization live the be benefits the will we to streaming will we revenue that kick opportunity streaming, within video Video are and believe in our our up which creators. testing we the off most sizable revenue, pass of short ad, tipping Later is already GMV growing e-commerce live which will We're content quite ramping largest

excellent of play and by most XX namely linear in Clash DAU, the has franchises mobile titles popular Royal. event Flash success League particular top a is to grown our of out profile monitoring on Valorant ranked and of eSports team among to release, shooter, games gameplay five competitive attractive game two years with still you Finally, you iterated popular that within its leadership moving in may the franchise top Mobile three in thanks our is their category on mode, chain by they a be Many its earnings. new PUBG categories to franchise and acquiring aware only category. Class content of tactical of more Legends expanding, a is hyper the their game leading games. mobile top consistently the than less of into After and world. number of of are by these Twitch revenue studios. way MAU. games aware the But on Clans most game lower-profile and are focus have and experiences, DAU, in is studies tactics, high-quality XX title highest increasing PC while this one international

cross-platform leader bolt-on international Miniclip we Grinding XXXX, Exile acquired Games significant we share. acquisitions and the has acquired has position Based by of it mobile since in in action we on it sports in side in steadily XXXX, proven in as game games. Warframe example, low-paying that Extremes promising expertise, confident a Since mobile games acquired releases with game as from Digital Since we in the revenue through model has longevity grown to success, in XXXX, Game-as-a-Service our to Gear for the Path one to global become hits game in We're For leading become leader have a our genre. development new competencies with XXXX. PC our greater outpace our studios able increasing be studios. key emerging already facilitate industry and the participants well with of markets publishing console category-leading platform in billion in our US$X.X to increased acquiring extension we'll future. our We're bigger as

existing penetration, deepening grow Going enhancements aim operational further product to via optimization. our titles we and market forward,

to release expect to growth, we continue titles, we'll for addition, which additional and In beyond. drive particularly new XXXX

James to pass I'll that, with So review. discuss business to

you, Thank Martin.

XX% social total fourth of Services advertising the our revenue the networks For international our represented XXXX, our revenue, Online and was game XX%. quarter sub-segment XX%. X% FinTech XX% and grew year-on-year. X% of games Business within of revenue, was VAS XX%, domestic reached which and

RMB X% quarter, billion for For the Value-added up XX was year-on-year. Services, revenue segment

network subscriptions year-on-year and RMB video more XX billion, from revenue to reflecting revenue was services. contributions live X% Social up streaming accounts video

subscriptions sports high-quality events. XX% $XXX to subscriptions year-on-year year-on-year XXX VAS content total video regulations, million, X% million, animated series, content to grew popular X% sales series and from and increased Our to benefiting year-on-year Music and million. XX thanks Despite to channels subscriptions increased services. drama expanded our

and updates X% Royale, billion XX a Festival and consolidation moments. deferral viewers minus content The Valve exclusively Wild sales offset direct Video Our games. effects attracting their In concept growth and online accounts. upon true-up domestic incorporating due million International as unique RMB of seasonality & up viewers new Fighter. million by Year's watched Moonlight video in sharing several revenue Accounts, playing carried XX% and Gala, XX first Blade for accounts Honor games rock XXXX the video well billion. to periods, XX to concert largely by was grew boy-band Weixin Spatula RMB digital and quarter-on-quarter was XXX Rift to Revenue features Eve of XX the revenue reflected to Clash decreased from increase with year-on-year streamed Battle the controls softness of Gala to adjustment League games popular Golden indirect super on extremes. Dungeon in revenue the of on of year-on-year in CCTV live Westlife revenue games mobile from and Kings we as Spring New group We Legends: plus viewers. clips periodic Mayday this million broadcast as

experiences. simulation, interactions. attractive Engine's graphic life-like code and to integrating For associate to upgrading more We're we're QX, physics the providing base services and more facilitate capabilities advanced Unreal real-time most enable and visuals rendering

can where animated Engine For users example, we're Unreal Super use an of their customize Show in for application testing scenarios. XD social avatars QQ in

key games deeply IP We're China. calculating our and our in to Turning broadly. franchises more

Honor games, based links experiences. animated physical Kings, increasing characters. we're developing that movie on We're content For of and and to new thematic creating a popular series its world game

Mobile. provided Peacekeeper Dancer example, Mobile the and events QQ QQ Olympics For into Speed Elite tied Winter in we

quarter, these of X.X% In games Total year-on-year, about of total of from contributing terms protection implementation, receipts. decreased minor year-on-year, domestic our strategy time international XX% earlier. under spent. fourth grossing grossing spent during game receipts spoke X.X% total time XX% declined our the total from users XX domestic users Martin contributing games our

Here, by some I highlights. just title and note Play's individual experience. cross-platform Google gameplay Year the on Studios Pokémon TiMi Pokémon developed Game award dynamic Company UNITE’s the and of Best its jointly for

released updates characters, language new inaugural Riot December, downloads. series enthusiasm setting the and a for world. release Legends Final chart million video the series the of game popular benchmark viewers, during and production its as TV consolidating of accumulated grossing materially on had an of enjoyed in animated of history, boosting record it user and most Clash League the drove in released Championship Arcane, character million peak adaptations. DAU attracted Valorant's response. Esports game's lead and receipts. a Superstar XX tournaments highest tournament which viewership As League eSports XX biggest Legends marking one its Valorant's set Building and top value week and Netflix's Royale's consumption engagement the Global following concurrent has high-quality were English

in spending more ad spend and regulations advertising. including of and year-on-year the quarter-on-quarter services and Moving inventory, fourth on RMB launch restrictions personal Sogo. on which on Weakness education lower changes, quarter, ads, bidding density revenue than Internet protection consumer to generally incorporated CPMs. online ad those in average due minors as the XX X% between XX% in our Segment to and was we've reduced consolidation Internally, ads Ad sectors, billion down law. limitations reduce elderly regulatory offset and for strength staples information the games

X% and year-on-year social quarter-on-quarter. Our and revenue XX% billion, down was RMB others advertising XX

using programs for coverage pages was declined we service Weixin's XX% advertisers customer Over daily active spending users our one-third via the the landing While expanded representatives from WeCom. of as revenue advertiser year-on-year. moment ads ad to over connecting reasons mini and per generated increased discussed, ad and advertiser

XX% quarter-on-quarter revenue top-tier to X% and Our releases RMB was and series fewer revenue down as advertising variety year-on-year declined video media due of X drama ad billion, shows.

Business and was Segment up FinTech billion, RMB revenue at Services. XX% XX Looking and year-on-year quarter-on-quarter. up XX%

score. transactions. For FinTech and mini strengthened network user growth is security, volume volume as increased tools upgrading year-on-year expanded programs digital functions as Weixin merchant of customer an of transaction for within benefiting revenue payment primarily yuan mini by Pay from program-based by the ecosystem We funding acquiring Pay, management services, transaction driven commercial our such and payment phase. digital We option additional increased SMEs part enhancing now by reducing pilot Weixin friction support as an and PBOC's

Business For public services, industries. transportation revenue mainly usage was increased growth Internet Services, and by driven retail by the

automate such John manufacturers our discuss from digital Things and Heavy financials. We're X to We AI cloud transformations, management Internet cost product proprietary quality now transcoding for increase distributed industry check to solutions, released cards control and productivity services efficiency. technology network deployment I'll for processes enhance interface and from which Foxconn smart on-premise assisting native cloud to AI efficiency. And have costs and and leveraging thereby of and app consistent customers in Orca, their reduces the cloud proprietary cloud. and production their enables clients migrating called video We information as can developed cost and and the performance Sany our system inference, leading designs pass operating on a

Hello, Thank James. everyone. you,

including of year-on-year were from X% ventures td.com XX.X retail initiatives other gains X% or year-on-year of of or quarter-on-quarter. by For costs down cessation associate XX an up XXX.X community year-on-year quarter-on-quarter, to of attributable an Net finance in reflecting quarter-on-quarter. year-on-year XXX% profit vertical. of Net quarter-on-quarter. expense RMBX.XXX, was X% were XXX% of net year-on-year or was RMBXX and on profit profit revenue down XX% which billion investment Diluted and year, to arising RMB from billion, RMB investee Non-IFRS of of non-IFRS Q-on-Q. billion, RMB one-off as non-IFRS quarter-on-quarter. and, or quarter RMBX.X such profit associates losses or of associates were JV XXX% XXX% RMBX.X or last billion, billion was X% the billion, share Income disposals compared share year. BIM the tax primarily losses X% XX.X was certain quarter-on-quarter. certain suggesting joint RMBX.X billion items of RMBX.X billion compared associates or of as gains up XX% fourth Operating transportation disposal RMBX.X increased XXXX, quarter. recognized RMB Share last were a was RMBX.X billion, companies, equity billion, to billion losses were Gross RMB the IFRS net XX% was year-on-year share up billion, service up up XX.X XX% gain this associate. total or holders EPS XXX% in profit year-on-year

net equity For Gross XX% disposals of the year-on-year. full year-on-year. year IFRS accounting XXXX rate RMBXXX.X due up JD.com RMBXXX.X to certain during from up up was year, billion, profit Effective lower of year-on-year. step-down XXXX, including XX% last total game. RMBXXX.X recognition investment tax year-on-year. often profit RMBXXX.X was was related value year mainly up XX% profit rate markups XX% billion, big attributable the the tax versus revenue billion, The to billion, was X.X%. effective for fair holders was profit Operating was

share financial you I’ll figures. with our Now non-IFRS

was quarter, or profit down down billion, fourth Net year-on-year, was EPS Y-on-Y Q-on-Q. holders quarter-on-quarter. Diluted RMBXX.X equity and X.XXX, XX% profit year-on-year quarter-on-quarter. RMBXX.X billion, attributable operating XX% down to XX% RMB XX% the XX% XX% For was or

profit year-on-year. profit Net For the billion, operating XXXX, full X% was up attributable equity was year to RMBXXX.X holders X% billion, year-on-year. up RMBXXX.X

Moving on to gross margin.

as of in four costs overall mix in margin lower investment our Gross well For XX.X%, areas, as our year-on-year points the strategic network. was businesses. margins margin XX.X%, services, advertising points advertising quarter-on-quarter. was continued sharing or as mainly various XX.X investment percentage advertising X.X Both notably down growth percentage itself. services, was the segment, year-on-year online increased as down Q-on-Q and points within domestic towards point events account key reflected X.X percentage was as points both quarter-on-quarter, By support content XX.X%, services, shift account areas. down and costs well in Gross percentage infrastructure quarter-on-quarter. mix and marketing X.X and well expenses billion, services advertising margin in were and within by -- stable offset Both quarter-on-quarter on year-on-year by content computing, year-on-year. and spend driven primarily year-on-year XX% year-on-year. expenses. whereas brick-and-mortar X% on international year-on-year substantially mainly primarily or expenses. cloud spending quarter-on-quarter. as decreased operating equal greater up were and and XX% business R&D revenues. segment, points XX% were expenses reflected the Both reflecting advertising up or X.X or regulatory On about broadly percentage billion, up rapid revenue was the on Q-on-Q. as margin with investment year-on-year G&A revenue X% office-related shift The international gross the and services. offset increase key for mix live salesforce, operations. quarter-on-quarter were were business Q-on-Q. our year-on-year video were XX% year-on-year revenues, revenue costs, Q-on-Q Y-on-Y up gross Q-on-Q. software, RMBXX.X The and X%, greater to R&D for billion, decreased CNY points stable Decline driven Selling services and marketing increase of strategic XX.X%, gains marketing in partly and spending year-on-year, billion, bandwidth video represented content Selling esports year-on-year percentage in faced XX% quarter-on-quarter were expenses were of and X.X digital year-on-year, salesforce broadly continued as streaming by R&D digital revenues and on for content talent, as shifts RMBXX Q-on-Q. and to VaS X.X% driven Whereas year-on-year on our or year-on-year due Both marketing Y-o-Y well by well our associated mainly revenue the associated greater most gains, headwinds reflected revenue or partly as categories, decreases changes by for expenses percentage of RMBXX decreases down XX% continued margin X.X overall expenses from FinTech expense increase industry increases excluding R&D gains, -- strategies. with decreases

G&A Excluding or quarter-on-quarter. share-based compensation, expenses XX% increased XX%, year-on-year by

As had XX% end, XXX,XXX employees, or quarter-on-quarter. year-on-year we at quarter X% approximately up

look Let's operating net take and at ratios. a margin

net the was to fourth X.X points due points mentioned percentage operating down well For X.X non-IFRS quarter-on-quarter quarter, year-on-year percentage year-on-year percentage points Non-IFRS the was associate as above XX%, as points down or percentage from earnings. the reasons negative impact Q-onQ. or XX.X%, margin X.X margin X.X our

Let's share move earnings and dividends. on per to

shareholders' Non-IFRS share RMBXX.XXX. closing the is to value market at to when dividend last with about share. the we For is payable EPS June, was are Based special an HKDX.X RMBXX.XXX on on proposing we shareholders of RMBXX.XXX. annual approval Subject was per of shares. RMBXX.XXX year. diluted stable this was AGM, distribution in JD.com This of per XXXX. Xth today's form HKDXX of JD.com, interim XXXX the dividend EPS interim compared declared XXXX, and the On XXXX, basic in of specie of special was and EPS EPS December a of IFRS price XXrd dividend

mainly Within the billion compared cash Total flow year-on-year share should partially RMB cash flow was or Net was the by XXXX. RMBXX.X and up during XX.X listed financial Free companies. strategic offset debt and end balance year-on-year. acquisition brand-new investor of XX.X CapEx on investment XXX% the our of free the Thank CapEx for will shareholdings [ph] billion quarter-on-quarter. was XX% I reflecting you. metrics be billion, key CapEx in securities, a sheet XX% up and XX.X total RMB increased other billion, quarter, XX% at X.X quarter-on-quarter. RMB RMB to certain on quarter. CapEx, Non-operating stable billion, year-on-year divestitures approximately billion, market subsidiaries, reflecting billion quarter. last year-on-year or cash some operating or that value the Finally, of to flow The quarter was XX% RMBX.X position fair of generation as mainly companies, was XXX excluding US$XXX listed billion RMB for

shall we John. the Thank questions. now open you, floor for Operator,

question one and follow-up will take We question each time. one main

Thank Yes. you.

line Our Charlene comes from HSBC. the from of first question Liu

Your line ask open. is Please your Please go ahead. question.

to the market management assess you coming I large growth through guess challenges the question expecting business release, that fair relative opportunity. is the we And understand content follow-up have I outlook In at in advertising is least and of you at the and company two? we have regulations. on the segment. for advertising the could on late only Thank Thank to a three to first context quarters? would I online ongoing see assume for growth year press the follow-up a in a macro resume regulatory in or advertising business XXXX, how you. negative that development, sustain

the you thank for Charlene, question.

first months be inferring logical a of to few So in the trends inference. seems XXXX, that in of terms the

certain Tencent’s last trends heavily several reducing impressions. to per the advertiser that pulling a there's thousand of the effective which quarters, In to pretty therefore, has their relative to versus categories whole, sharply industry down and over terms as for advertising notable regulated, due advertisers been our spilled the of industry revenue bidding us mix, impact a on are

dropped sector, the total single-digit that quarter, online percent of low advertising you low year percentage education ago, fourth then the a a to revenues. of look at our advertising mid-teens to was if specifically, in So total our that revenue. And

in that that for as screen But the by inventory. sector inventory, smaller that of us has provide So then ad on a then lesser on a greatest limitation from industry ad loading in inventory, There's itself, there's such impact as from obviously the advertiser speaking, explains the reducing personal regulations regulations the information number additional and advertising impact largely or the measures the been factors such around education, the have work effect had And protection ad advertising that decline revenue the targeting around categories ads the impact. our a year-on-year. generally games reduce been Such as but ongoing itself. of negative have measures with and insurance.

that advertising question. So I hope answers the that

laws is pricing or ROI click know related how My terms impact to we close and ads -- follow-up Thank online potentially new labeling to the question about features, you. of business advertising. still clear in regarding should quantify and like one of think to would I advertising Absolutely. the on revenue? on our

The Yes. hurting previous advertiser you quarter, refer meaning us on fourth specific to And where I impactful were industries. if negatives rather were were those regulations an revenue our would those impactful. the the in on more look the removed media related the that less regulations regulations within adjust less to then biggest factors the as inventory. how us, on use we the advertising advertising impactful negative the back at then completely inventory those that answer,

So have you the into that looming impactful last less been as for historically to referred in I changes fit that think future the category, us.

you, very again. James. you Understood. much, Thank Thank

you. Thank

Operator, please next have the question.

you. Thank Yes.

ahead. Credit the of from go comes Our next Kenneth question Fong Suisse. line of Please

your Ask question.

we my I have And Thank we our distributed taking of on shares dividend. Hey. in question. question you investment a year, last part stake JD disposed side. the Late for our Sea. management also as

very balance our still we a on investment sizable have that given So sheet.

share of for the we on we our criteria sheet. in price about investment buybacks, balance new think of share would given think the between what Thank investment how should unlocking for and we balancing And investment. our is undervalued, significantly should remaining think and that our also proceeds, value terms the unlocking how you. sort like about So

Portfolio private to management portfolio in are a we our couple a distributions one bear listed. Over that that mind, then XX% not companies an very typically is actively companies. exits, perspective investor, of invest there's in in and perspectives have perspective, private as of yet investments largely

them of until is other companies. them companies. our because the public by companies becoming any have of public long On value private portfolio the helping beyond grow history at we majority time, point and in then hand, in a that's when they're investing and And market

we on and divesting, in that fund is a investments So be our so to companies all listed them us that's consequence, to they order can continued where in it incumbent become in grow reducing publicly And play, companies be. continually help stakes speak. private as and to

which addition, attractive, when the a our in consider there's we in up the other we versus may investing also price And at highly companies. investments in own stock in own companies, perspective, step is times then own stock stock while we invest at look investments price. capital we that, In other of our appeal our

that fact years several past of part the of or were for year months two on it's continual have process, conducted new every divest, that conducted referenced reality, dollars in attractive spotlight last but high than the we put a of just we the profile has which few and months. divestments is that JD&C the in is which triply billions usually and X news, divestment, we've not the more So unusually you distributions past

question. So your that's first on

do such cash how versus and core highly in that the generative about, expansion. question as our flow software our is business second investments buybacks we're video, your business core investments so forth. of the companies making business funding we enterprise is other and game areas of international internally terms balance investments In and And in very accounts, versus capable in

merits Beyond a conducting versus the relative Then which companies or other invest that, considering we valuation and of in of number other shareholders. is we're variables of companies well stock. of we the our own share directly to do look one investing as distributions buybacks course, in there's at of when

in And regular in terms in back terms active of shares of kind months, we've in been of also market. so stock the you And can declared the have few on JD distribution the been active buying our dividend. past we the see we've that

So those have are the we capital X to channels through which returning Thank you. shareholders. been

Thank you, James.

Thank you.

line Our of the from with next John your is Please ahead go Daiwa. question. question Choi of

taking good a a and have you follow-up you thank question evening and Thank a for I question. bit and my later. probably

guess are I in starting kind right-size areas. headcount. First all, headcount call you about to your of of some business the guys of so

know areas to prioritizing accounts games also profitability general, just should So, EDO the that a key would headcount guys growth better your perhaps be international as we an we you for reasonable growth, going forward? our I like impact would mentioned going that some -- with how forward? will but Are investment is strategy SaaS, mentioned, you of expecting side growth James. this, on of more perhaps And in like to a follow-up have

is that Given guys that some in game opportunities the just as market public the some opportunity past -- be the And it doing a your on and valuations you. apart down of see opportunities -- are you to more what volatility, of and a in Thank lot. mean, small to this we area? this from lot others? of you strategic have the good have such the and discussed, are a private been us studios share these companies you challenges that the Does buyback that of come

for you Thank John. the question,

the So question. investments I'll start with

JV divestments and valuations become consequently, with we've well. you I that as the become situations on we active situations, but would So, more also a more have And active. and that say other in more can the have volatile been number see of the disease

held divestments So same very have the are rate of we rate [indiscernible] valuations approximately in of have companies as year-to-date, running the public where investments range. well. up And at dollars our our made there is investment

we're own where so those other our adjust opportunity taking stock And or including in the reasons, our situations price. capital companies very macroeconomic free stakes dropped in of because invest sharply have public to to our and valuations

address the software And our video the and games. international that's I question in investments Martin slower accounts, and headcount whether growth us of will So having about control result enterprise will think then on front. in headcount

many shift is expansion we industry the And industry, efficiency, core of driven past entire in actually have talked I actually background driven focused cost the think now the and actually of paradigm actually terms actually by And about investing for part overall strategic the look control increased is areas. that industry, that at growth businesses it of also few main different and areas, by within into rationalization. have of headcount, our but years, is and businesses, fact it is and competition if part more quite of in more in on headcount we terms has been Well, rapid. that you the the been the of

We're But businesses special we’ll expertise, same be technology key fresh end the terms of still to really are people controlling So or some be the non-core our in the year headcount certain we of along exit. would the streamline noticeable. invest a non-core we hire what by this, We'll some the headcount we of in time, the in in slow actually to of overall, than we cases, But, some fast the and slow businesses areas. to and to year core continue where is businesses, and be natural our going what in turnovers. seeing that hire of invest some with of very doing every And that higher be it's continue the areas, replacement rationalization a in expertise is to that growth in year. we outstanding turnover we headcount, And cases, may previous strategic grads. the it of terms in there's at more we continuing would we continue down. underperforming and have down will will

that's it. the think way about So we

of organization. the muscle So overall, overall increase to the we want

we’ll So invest. in the that core terms want areas of in we growth, grow the of to to terms businesses for of the continue key long run,

an impact on businesses. going not have it's So to those

the question? take next we shall Operator,

Yes, thank you.

the question. Our of go CLSA. ahead Elinor of Please next your line question Leung from with comes

the opportunity if game the on XXXX Thank I growth some whole do that is question resources the side. ask you. minors. how no we you game Previously, to for to you protection approval questions. management so the that Hi. And can gaming mentioned the game new of My the handle is if the we to for there's wonder back reallocate you year? done, development. Thank for domestic resources our market see direct the

for Hi, Thank you Elinor. the question.

don't on visibility published the in we So, is that have product-driven generalization, ban-out, industry not fewer be are in very into a they course existing published new helpful true of games than we this also to. history domestic large would. game up number But the the can't and that that will assumed market otherwise when releases, somewhat of the at faster already periods may games still we XXXX. is the be and the there yet a grow rest growth perfect what there's of game It's received industry, because been looking have

game think of hasn't direct in the measures. impacts collectively, least now fully, more at implement happened Now, I of the the protection think months because that we larger that and industry, measures, the minor ourselves, but peers especially the and those completely for we've indirect past our in and few

the back from resources shifted so minor and enhancing protection game implementing operating And the toward new can be measures content. the

to the question. Thank Operator, you. move let's next

you. Thank Yes.

Our your Morgan is next Please the comes line open. from ahead, of of question line go Yu Gary Stanley.

Hi. Thank question. follow-up ask may I cost and a on I regarding one have regulation. you and for the margin question to have opportunity

This year, from margin strategic other we optimization, year, in last expecting also we enhancement about and talk three investment perspective. cost So, product about potentially in that focus these areas, growth. slower a areas, addition therefore, talked to in continue

margin revenue we in look profit at how of should Thank kind growth relative forward? going outlook indirectly, at So, XXXX? how look you. And to should we

mode I industry tough transition a sort years, about. those very across think everybody actually mid-XXXX, ranging which of very to margin driving talent a and talk an in paradigm we talked are terms industry. the the there is entire and a trying board, and aggressive for at actually competition not would there's expand in grow I that's say we during faced actually competition marketing is the compression sustainable of XXXX, that lot from the to growth from you this that's value-based, and and and the presentation, healthier actually of fundamental in us, And much about all the growth efficiency-based, fundamental to for industry industry. a And just cost and that's more shift

why and so optimization doing actually And cost is rationalization. everybody that's

margin structure we two of So, on have on more these years XXXX. the are I type for say from marketing through starting board we on reasons in costs, and a different gone costs, transition staff the would years probably see optimization stable cost across and operating then that actually once

a on related specifically and And fintechs. our I regulations, follow-up Thank you. have to

between WeChat business So from or apps risk you. the how on potential the main core risk fintech there at and of if retail of Thank corporate data Pay limitation change least the a regulatory at any should we look [indiscernible] sharing potential separation structure. or our is or some business,

Well, things, doing. we're I corporate From this and referring are a company, exercise holding think that right. to different financial you're one probably these is the structure perspective,

establish we are and is a We needs systemic trying eligibility the regulators the to risk company. monitor industry actually the holding actually companies, our systemic closely financial company risk, very working company to and holding the which for body for is think to financial to as license holding well positive issued. reduce license have seen financial our being the with have as use and company, clearly, we investigating two to the in a both very actually regulatory be which given holding And been financial

need should the establish fulfill over a the not way. some clearer company, organizational we we So time. to change, but And we the be criteria we become And a and in framework there and impact it. the financial material business if will needs thought, felt we it embrace to criteria then

entities overall, would rebank over [ph], always it the the it run, neutral, recognition regulatory the more be license be that long entities of clear and regulators see seen licensed it's a very that support. should based felt on experience actually would on have short-term so been positive because we we the the And have and supported

That's you. Thank very clear.

Thank you.

is of Please go question Packer the Paribas. from line next of William Our ahead. BNP

taking questions. Hi, thanks management. Many for my

domestic the on gaming Firstly, limitation….

William, at quiet you're a me. for least bit little

hear you now? Can right. All better me

much Yes, better.

Great.

Sorry about that.

traction gains? spend expect adult on timing spend then relevant stakeholders? to gaming any gaining and Thanks. domestic talked you of And on far, time call, front, restrictions those cultural on restrictions benefits the last on been the follow-up on Do you a and some industry. wider Should or the we arguments of gaming be thus with the On technological -- domestic minors. focused have think

Well, think, far, which regulations games, -- big not, have that regulators of we I But one, been ecosystem we benefits tech in applications that of as industry is entire the something improvement actually can’t majority making it's on We It's -- on very and has technology on a there been very factual actually and actually the it drive terms number protection, on Tencent industry very is think that. speculate clear. have very actually and drives and -- and as we're on spectral haven't the know good progress of are -- all very the additional we this or is we in the right? been And the actually understood heard. we more focused as minor should focused on, it and more vast focused think I it's and so to hardware And are improvement. understand we to able by software kinds of a fact demonstrate continue stakeholders. be the whether

Thanks color. the for

you. Thank

Yap line is from go of of question ahead. next Citigroup. Please Alicia the Our

first on Thanks you. I thank management. Hi, questions. question have a broader taking value-added my the service for evening, outlook. Good

gains So we gaming face revenue could various and a And headwinds norm see it and the community of on also headwinds. also platform growth. the domestic new the enter competition digital then, revenues slower in a regulatory like numbers seems of after regulatory content

short-term growth the segment? or model challenges? others beyond growth look potential profile need business of the And follow-up. the metaverse longer-term then new revise So or should Do this infrastructure some how even some new I breakthrough you revenue the setting as stream. such we a And think about have to sustainable for service to could you we us a for help value-added think broader

period, And course, reasons. forth. deal ex- China growth growth So, you new as were super years, was think so to Then And next refer and that's entertainment vigorous industry industry of situation entering over first at great industries deceleration faster was discussion of of the a the game actually time, fears so Maslow's came a that if concerns question on we're The revenue. growth to around all of change most technology there the no of those well the back the new generally set for of normals and GDP from and is whether in couple game in of I of moved that, is the to background. growth are and positioned Alicia, the the the XXXX of into new a comparable games itself now. most and in normal due on that benefit market, And, hierarchy it's the to industries growing value-added similar services your satisfaction youngest. than there needs. and entertainment about It's we

very experienced. then of grow China future. over game business, course, the that's different that other and that layer is spending time. the activity top, rapidly. games and pretty subject on, will concepts rapidly on grow leisure around belief metaverses economy Entertainment To also grow will our domestic So will extent and beneficial. rapidly more And and we But that I to hasn’t a deceleration a cycles both experienced have think have overall, the view our constructive as whole, game the is has which we industry on regulatory for business international now the and

you. Thank see. I

is, true-up in you can from clarify release. question this that Second the bit press mentioned Supercell on revenue little you adjustment a

the So next one-quarter a see up catch catch be of will couple up. this should on quarters, there on is we also this some deferred,

we how Thank So about that? should you. think

Yes.

excluding So international changes in a FX up, year-on-year. the XX% was catch perspective quantification Supercell revenue, from game excluding our

that's, So a think, underlying I of reflection the trends. good growth

into hadn't but of in assumptions, various we behavior, of previous catch-up, those playing booked player under From because into And but on previous change when the the we calculated here, which the case game changing receipts cash began a it auditors of players change assumptions quarter just different payer life review they received cash theoretical time, because receipts of had was the the based can the subsidiaries, can the in assumptions translate game. quarters, P&L they revenue. previously In time nature in quarters. for to the also terms which was our of recognition that the

Now players life we're money based the begin spending game. in when on payer the calculating

been they game. player been hasn't just change about the a behavior. we think made in There's within a a there the So change from purchase how the underlying life in quantifying when

first the on will in that revenue and XXXX, growth similar exert our international Riot quarter quarter in impact Looking of a went for a of a the forward, game small first Games XXXX. through negative exercise we

but So quarterly reporting for be source our jurisdictions time, the I it's any for as also number factor. international strength, a source a noise negative fundamental given studios worse, of will quarter, cancel a think in game better in a but of or within positive number over business, noise that's a of a noise. the fact And can of out,

revenue just that that's why mention in was number to wanted the that underlying from the this we headline growth so the And at adjustment, benefited fourth mid-XX% quarter, I positive but referenced. recurring number the

Thank you.

Thank you.

question Please your from the go line is of line Robin next Bernstein. Our open. of Zhu ahead, comes

Thanks couple on business. mean I One that if of please, are everyone. SaaS you mentioned is may. have guys just enterprise a this questions, growing you I I growth.

as as margin you the could realign is I as comment impact dilutive And presume the at enterprise back whole to business from could on from growth comment follow-up, this business? pulling macro, you're right mentioned you both a if of on margin then accretive overall services kind which the of could the now Firstly, the whether timeline business. you seeing And business grow being you less cost, the much in services Thank you. expect margin for doing projects if or FBS you're down, on there that becomes state any you'd all it Is faster disruptions impact you order than industry and to -- average? a change from on detail to the more business bit little where a Internet cut, slowing where into or of a are to go are front?

Okay.

to negative prices, margin, grow business, be heavy hardware get was trying the into going the also scale can possible. revenue in would low On has that some in what you have you And that you very to past actually is of customer, cases, resale, many in happen the a are as cloud customer made was very discounts sometimes we for margin. some or -- as been so industry or registering of develop the to which to undertake involving business, and in actually you some relationships very the in in entire custom and actually have solutions the then, terms cases, cases,

have this So marketing channel cost business. then that you and get -- order is costs something to to very provide the that in and there's sales big

loss. of and be think PaaS have and reached of the and registering over of of healthy much security, of course, these in And, into a a real-time that costs. same and to growth, which full how at the disciplined the actually reuse which PaaS, terms over different carry we which we So continue engaging as costs time, and within we IaaS of quality that what margin given start grow what And that. the then happening again we quite the to SaaS, very defray are have over up-selling communication all by development we are business as different for which And customers. can and PaaS And nicely, -- same IaaS I would would communications we we a terms of terms will more this margin is our that's terms improve right out are that the the higher once have and developed, a in And also than we and cloud, we video tools, including time, our these much collaboration And reselling actually actually the of and we at of over PaaS, called for enterprise discussed also over there's sort standard which many scale think pull-off length services also and I are in PaaS would larger full actually database, be self we actually going the pricing customers. actually quite and not and at customers focusing in well margin a can felt of include in much which would and we business. of, pool account also of is, video-on-demand. including hardware good time meant customer products, in growth a relationship at provisioning the profile would products, including more are time, on be growing felt which can be number revenue

And revenue, right? but It's about. loss, the is having not we not is that seen So I'm registering including not PaaS, for just actually you've SaaS, going and overall, to right. margin cloud incurring business, costs, significant any repeat talked what what diluted, net and it's IaaS also

margin time, loss you start the And But of businesses actually over can monetizing at businesses. profile on start actually to you are of business. then making profile these the margin improve. these time, would cloud improve the So can SaaS the same

we what that's are the long-term. mid engineering over So to for

Thank you.

Research. the from of line go is question Kramer next Our Richard ahead. Arete Please of

about the very One, I given already. a comments overall Thank lower obviously term from talk at know you. in XXXX, are reasons for but difficult structural of backdrop, you've of to that clear context this made the mix can you for some to And record much. new industry James. And I follow-on a XX follow-up some whether looking see the a in page Thank a makes the and you've will with paradigms Martin medium of from what's have Tencent. it and these you transition just old then the profitability? low margins level

Perfect.

rate, think losses industry we overall but businesses loss And would rate. -- do it's that, margin right, cases, think some to on growth the need actually a going then And registering I heavy we have sustainable of structure at In this to a of and out look lower industry profile would has be I companies may loss-making And and so this and more growth But-- can really actually way. the healthy. think quite business. rate, the the be for growth a their lower to there actually And rate. lot a the if much costs portion industry change cope of for business companies revenue significant to with see the rationalizing XX%-plus would the XX% relying growth the a are engineered right? the coming capital in more actually overall, which you are start I structurally profitable if to past, actually profitable huge actually in then is markets

And maybe a--

a transitioning abnormal couple really of years. We're very for structure industry a from

then And maybe a Okay. second Thanks. one for James.

investors and out a the to clearly, thought Tencent might of is cloud and series businesses big other of industry would world, back question, your large roots, company and tech. spinning needing business might Just or and sense given Tencent the a that which eyes financial in areas the around own not seem of pure-play its or scrutiny your transition laid beyond out of to elements holding lot Would the services to have make so you into regulators? business of it a go so there's devolve maybe the you've choice that what the to of of as consider

question That's I a for more an Pony interesting a for me. think and than question

think let -- speculative. me that I highly question. this answer This is a

of and point The the think have and And its for one on you be is actually that optimized the more is some each doing growth. in thing we not for own businesses how consider of service up most think sustainable pieces. at draw I just time. that's actually reengineering important own than its something to sort I important healthy this this

on. you. that's focused we're So, I what Thank think

operator. you, Thank

one Let's -- take the question. last

Yes.

Our JPMorgan. final of of ahead. question go Yao comes Alex Please line from the

holding in given growth gaming reduction first Thank I guys company questions. the the the need taking of contribution minor business, structure? And guys for you for financial I comment my should in fintech we a One weak revenue have you a is half to structure. on follow-up into to have question. XXXX? not you. to gaming the restructure Martin side Thank you to need revenue Do domestic do company revenue, or management asset then two the gaming on to expect sharp holding financial remain

that the second revenue question, Hi minus Alex, time the on the changes mean, the XXXX. the by made of the first course mathematically, during in we I reduced of half yes, spent

negative a so XXXX. impact half through growth first of And will be our there on year-on-year rate the

to – right saying is without business what now over the well both longer need for financial once going -- positive. to we're right we our the sort it's not could to of on So eligibility actually this license question, be going as as receive term, get if but that investigating it we the our the that the our – and impact have neutral. is be And license, income

operator. you, Thank

call the now. closing are We

If you of our please this company www.tencent.com. visit will be IR check and the Thank release soon. quarter. press also and The you, next of to wish website section our financial other see replay out information, at webcast you available

concludes participating. this for conference today's And call. Thank you. you Thank

You disconnect. may now